How safe is your money and shares at a reputable broker?

J

john7722

Are you ever worried about your cash in your brokerage account?
What prevents even the biggest brokerage firm from stealing the money or selling your shares and then stealing the cash .

Could a crooked CEO of a huge brokerage pull it of?

I have no idea about the security in place but i was thinking of this scenario, you wake up one day and accounts of thousands of people are empty and CEO is gone.
 
Honestly, I can understand and do share the same feeling in this.
First thing I tend to notice is if the broker is regulated with strong regulation bodies, because if they are, it means that they can be trusted and relied on.
But yes, even I do sometimes think of the fact that even a regulated broker can also scam me. This is not uncommon to think of. But what can be helpful is to see if those broker are member of ICF (Investor's Compensation Funds), which is a good indicator to tell you that the regulated bodies will have to compensate the funds to you, when your broker goes south.
 
UK FCA-regulated brokers are required to be members of the client funds protection scheme, which pays back clients' funds in the event of the failure of the company up to £85k.
 
the problems you are running are if you have > $500,000 with a given broker.
unpractical to spread eggs around for someone with a0 8 figure account
 
Personally, I'd be more worried about the broker taking the opposite position you're making. Most accounts at brokerages go deep red, so common sense tells you if you buy, the broker is more likely to immediate go short. Plenty of profits to be made this way trading against the customers, and it's perfectly legal instead of stealing from them, which could land them some lawsuits or jail time...
 
Hunter2020 said:
Personally, I'd be more worried about the broker taking the opposite position you're making. Most accounts at brokerages go deep red, so common sense tells you if you buy, the broker is more likely to immediate go short. Plenty of profits to be made this way trading against the customers, and it's perfectly legal instead of stealing from them, which could land them some lawsuits or jail time...
More...


In reality it depends on the jurisdiction. UK FCA-regulated brokers, CFD providers and spreadbetting forms are prohibited from taking positions against clients.
 
john7722 said:
Are you ever worried about your cash in your brokerage account?
What prevents even the biggest brokerage firm from stealing the money or selling your shares and then stealing the cash .

Could a crooked CEO of a huge brokerage pull it of?

I have no idea about the security in place but i was thinking of this scenario, you wake up one day and accounts of thousands of people are empty and CEO is gone.
More...
%%
NO not really;
maddoff was a small sample.
JC had crooked character problems as a gov, so give him a lot more money @ a brokerage + assume a leopard charges his spots??
As far as risk\ get a 500 page or 777 page ETF annual report+ consider some risks that have happens much more often.
I dont worry about nuke war\even though that has happened .:caution::caution::caution::caution::caution::caution::caution:
 
tonyf said:
the problems you are running are if you have > $500,000 with a given broker.
unpractical to spread eggs around for someone with a0 8 figure account
More...
If you're worried about this you can buy treasuries held in your name, not street name, and then most brokers will allow you to trade off that with a small haircut. If the broker goes under, the treasuries have to be returned directly to you and are not subject to the bankruptcy process, so you'll get them back in a matter of days or weeks rather than months or years, you'll get the full amount, and you won't have to worry about the $500K limit. If your broker doesn't know what you're talking about when you ask about this....it's probably an important data point for you about that broker.
 
Sig said:
If you're worried about this you can buy treasuries held in your name, not street name, and then most brokers will allow you to trade off that with a small haircut. If the broker goes under, the treasuries have to be returned directly to you and are not subject to the bankruptcy process, so you'll get them back in a matter of days or weeks rather than months or years, you'll get the full amount, and you won't have to worry about the $500K limit. If your broker doesn't know what you're talking about when you ask about this....it's probably an important data point for you about that broker.
More...

how is daily mtm handled if you post treasuries as collateral with a broker? do you still have to maintain a cash balance at the clearing firm?

i know this is standard practice in the institutional space but never heard of such arrangement for retail clients
 
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